What exactly is the Dow jones and why is it so important in the stock market?

Has it ever happened to you that you are watching the news and you have no clue what they are talking about? Well, that actually happens to some people when they are watching TV or reading money news online and they start talking about the Dow Jones. Since I want us both to know what the term actually stands for and also show you how this affects the stock market, here is everything you need to know about the Dow jones when looking for stocks to buy in the stock market.

Now, first things first, let’s start by understanding what it is!

Well, this is also known as the Dow jones industrial average. This is used as an index that constantly shows all the trading activities that have been done by the 30 large companies that are based in the United States. This shows how these companies have actually traded during a standard trading session that is happening in the stock market.

Now, which are some of these companies?

Some of the companies that are used to analyze these trading behaviors are 3M, Chevron, Apple, McDonald’s and Microsoft. These are obviously companies that we all know are very highly known among the public as they are part of our daily lives. Some additional companies are Walmart, Disney, Nike, Procter and Gamble and IBM. These are also well known as well as the one previously mentioned.

Now, have these companies always been the ones that determine the Dow Jones index?

Actually, no. As we all know, the industries are constantly changing and evolving and that means, some of the industries that have been part of the Dow jones components, might not be a part of these components nowadays. We all know that the stock market involves risks, and that means that not all the decisions made by these big companies in the stock market might not always be the best ones that these will obviously also affect the Dow jones index and the companies that determine this index. Now, as you evaluate this index, you should always also evaluate the overall behavior in the stock market so that in the long run, you can invest wisely at all times.